Gold settles lower ahead of FOMC

Copper recoups previous-session losses

SAN FRANCISCO (MarketWatch) — A late-hour rebound for gold futures fizzled and the metal ended a dollar an ounce lower as investors waited to hear from U.S. monetary-policy officials and their likely monetary-easing steps.

Gold for December delivery
GC1Z
declined $1, or 0.1%, to $1,808.10 an ounce on the Comex division of the New York Mercantile Exchange.

The contract lost more than $30, or 1.7%, on Tuesday and spent most of Wednesday in the red.

Gold got a tailwind after a debt downgrade for Bank of America Corp. and Wells Fargo & Co. The downgrades clouded trading on Wednesday, with U.S. stocks mostly lower.

Moody’s Investors Service downgraded Wells Fargo to A2 from A1, and Bank of America was to Baa1 from A2.

Moody’s said the downgrades “result from a decrease in the probability that the U.S. government would support the bank, if needed.”

Gold had traded lower earlier in part due to dollar strength, but that also evaporated as the trading day progressed.

The dollar index
DXY
recently traded at 76.847 from 77.089 late Tuesday in North American trading.

The Federal Reserve is expected to announce a plan later Wednesday to swap shorter-maturity government securities for longer-dated ones in another stab at jolting the slow-moving U.S. economy. Read the Fed preview story.

If the Fed makes such an announcement, it could support the gold market by putting renewed pressure on the U.S. dollar index, said Darin Newsom, an analyst with Telvent DTN in Omaha.

Platinum and palladium diverged, while copper and silver finished higher.

October platinum
PL1V
advanced $6.30, or 0.4%, to $1,788.20 an ounce. Palladium for December delivery
PA1Z
slipped $4.90, or 0.7%, to $712.85 an ounce, adding to its decline.

The December copper contract
HG1Z
added 4 cents, or 1%, at $3.76 a pound. On Tuesday, prices for the industrial metal finished at their lowest settlement level since November 23, 2010.

Suuply-and-demand fundamentals for copper continued to strengthen, providing support for the metal.

The International Copper Study Group said Tuesday the refined copper market showed a production deficit of 42,000 metric tons in June, and, for the first half of 2011, a production deficit of 130,000 metric tons.

That compares to a production deficit of 286,000 metric tons in the same period of 2010.

Copper usage grew “a modest” 1% in the first half compared to the first six months of 2010, the ICSG said in a press release.

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